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Renegotiating NAFTA—an unprecedented reinforcement of subordination

Port of Veracruz in Mexico

Renegotiating NAFTA—an unprecedented reinforcement of subordination

A comment from Mexico

Luis Arizmendi
,
25.09.2018

The North American Free Trade Agreement (NAFTA) between Canada, Mexico and the US entered into force on the 1st of January 1994. It is the worst tragedy that has happened in Mexico’s economic history.* Since its beginning, this Free Trade Agreement (FTA) turned out to be a spearhead for a hard offensive by the US to undermine Mexico’s national sovereignty. By being the only country in the world that has followed the Washington consensus to the letter throughout three and half decades, Mexico has become model state in the foundation of an unprecedented form of subordination to worldwide capitalism.

Global subordination in many ways

During her history of global subordination Mexico developed a number of characteristic features that prove the disastrous impact of multinational capital on virtually all spheres of the Mexican society and its economy in particular. Oil, gas, water, biodiversity, minerals, food, banking and even the education system have been meddled with in order to establish a form of consolidated North-South domination.

Parasitic accumulation by dispossession has brought about an unbelievable dispossession of public assets. More than half of the national territory has been handed over to mining operations, mainly to multinational companies. And it is a supreme dispossession of generic assets, as Mexico has become the number one country in the world concerning the commercialisation of water.

The technological structure of Mexico’s economy was ripped apart. The asymmetric competition with foreign capital not only destroyed whole sectors of the economy. Worse still, it destroyed the major national industry by putting a large international maquiladora in its place. The loss of its national sovereignty has put Mexico in the position of having the lowest monthly income (US-$ 0.50) but, at the same time, the longest working day of all the OECD countries. Salaries in the manufacturing sector sank between 2005 and 2016 from US-$2.20 to 2.10. The minimum salary violates the international agreements signed by the Mexican government, such as the Universal Declaration of Human Rights and the International Covenant on Economic, Social and Cultural Rights.

Oil production ruined

Although it was not included in NAFTA, Pemex has become the ultimate expression of the process of Mexico’s technological subordination to the US by being subjected to planned de-industrialisation, completely deliberately, and assimilated into the geopolitical power of the US. Oil production has dropped by 34 percent in the last ten years. Daily production has dropped by 961,000 barrels. 65 percent national oil production is for export and 35 percent is sold to Pemex’s own refineries. Mexico exports cheap oil in order to import very expensive petrol from the US. Even worse, in Mexico, the agreements signed with multinationals for oil and gas exploitation give the country a ridiculous rate of only five percent.

Food sovereignty abandoned

At the same time, Mexico’s agriculture has undergone a drastic change. From being an example of food sovereignty at a global level, it underwent a stark change to become a model of artificial food subordination. Under the “neoliberal” pretext that it was better to import than to produce its own food, global subordination has driven food imports to Mexico from ten to 46 percent. By 2020, the import of hard grains (maize, sorghum, barley, rye and oats) could reach more than 60 percent. According to the UN Food and Agriculture Organisation (FAO), Mexico is in third place for imports of cereals. The Mexican food economy has become a generous channel for the accumulation of extraordinary profits for US corporations.

Privatisation all over

Despite enormous funding to bail it out, the banking sector has virtually been sold out to foreign interests and operates as a means of doubling accumulation through dispossession of the national salary fund. This is by no means development banking, but rather consumer lending banking that operates with interest rates that are literally unconscionable, higher than the rates that foreign banks receive in their countries of origin.

Much was said to the tune that if Mexico sold all its strategic state-owned companies and opened its economy to foreign capital, public debt would be resolved for good. After three and half decades the result can be evaluated. In 1982, the foreign debt reached a sum equivalent to 134 percent of the Gross Domestic Product (GDP). In 2018, the debt is around 51 percent of GDP. Mexico has privatised everything and is a country with one of the lowest foreign debt rates in Latin America.

Loss of national sovereignty

According to the OECD report Education at a Glance 2014, Mexico is the only country in which young people between 15 and 29 years old spend more time working than studying. The OECD, in its Employment Outlook, has stated that Mexicans have the longest annual working time, but at the same time they earn the least. Even worse, the situation for young people being excluded from education and the labour market is worst in Mexico. Women have experienced the severest impact of this: around 33 percent of Mexican women of that age do not have access to education nor do they work. This is equivalent to double the average in OECD countries. For the Mexican neoliberal project a devalued workforce is more important than young people. This is one of the hardest realisations of the loss of national sovereignty.

Eventually Mexico has become one of the breeding grounds of decadent violence. The policy of death, imposed by the illegal economy has made what may be called criminal income a mechanism central to the dynamics of accelerated enrichment based on violence. Mexico embodies a new form of capitalism: necropolitical capitalism. This is one of the worst forms in the history of capitalism, not only in Latin America but in the world.

Renegotiation of NAFTA

The renegotiation of the FTA was conducted against the backdrop of this decadent scenario of global subordination. The negotiated “deal” not only offers greater control of the US over Mexico’s automotive sector, it also blocks a major injection of Canadian capital into the Mexican economy and lessens its scope for action. Owing to the fact that it is a bi-national agreement, Mexico lent a hand to the US attack on Canada. Thus, it will not be able to increase the delivery of aluminium and steel to the Mexican construction sector.

The US carried out a double strike. Negotiating without Canada greatly weakened Mexico. To prevent any attempt of the in-coming new government of López Obrador, the new FTA prohibits re-nationalisation. While the energy sector remains, ultimately, outside of its scope, the prohibition on nationalisation, however, constitutes a general block that also impacts on that sector.

A feigned trade surplus

Instead of reducing subordination to the US and making room for more trade with Canada, Mexico was delivered on a silver platter to even more extreme US domination. Deepening technological subordination to the US, the automotive section included the requirement of an increase from 62 to 70 percent of automotive parts coming from the US. The image of a large Mexican trade surplus visa-vis the US is simply a visual illusion. The price of exported goods was totalled without deducting the cost of all the imported parts. This is the logical consequence of intra-company trade that overwhelmingly originates from US companies. In fact, the new FTA will intensify the strategic logjam to Mexican technological development.

The requirement that Mexican car exports would only be able to enter the US if the workers receive US-$16 an hour is a scam. Its role is not to improve Mexican salaries its aims to block the entry of goods manufactured in Mexico into the US since it is difficult for Mexican companies to increase wage to this extent. In this way the US can also strike a blow at the non-US multinational automotive companies located in Mexico.

The new FTA only intensifies overall subordination. No progress at all was negotiated for Mexico and it left the way open so that, in six years (when the FTA is subject to revision), new and greater pressure may be imposed. Mexico will only be able to open up if she breaks away from its subordination to the US economy. If she opens up its dealings with other powerful players in the world economy and in the South.

Elite degeneracy

The out-going president Peña Nieto personifies the anti-nationalist interests of the comprador bourgeoisie. He has done everything possible to ensure that the new government is very restricted in its scope for action. The global subordination has brought about a profound restructuring of the dominant class in Mexico. The nationalist bourgeoisie is dead. There is now a political and business elite that benefits greatly from the dispossession of public and national wealth and its conversion into enormous private fortunes. This elite has hidden its emergence under the real, but not exclusive, offensive of multinational capital. Inside the dominant Mexican class, the neoliberal presidents have been the main beneficiaries of aggressive accumulation by dispossession.

A state of emergency

Meanwhile, Mexico is facing a de facto state of emergency. The violation of constitutional guarantees is a daily tragedy that has made the country a historic territory of numerous hidden graves. The Internal Security Act—which grants the army the legal status to violate all constitutional guarantees and, astonishingly, even the ability to self-govern—could bring about a formal or de iure state of emergency. It is a historical matter of urgency that the new government repeals it completely.

The results of 2018 presidential elections stand for two “NOes”: NO to fraud which has a long history going back to 1988; and, even more radically, NO to the Mexico of barbarism. López Obrador’s state of peace project represents the possibility to stop barbarity, but that will depend on him being able to drive forward national development. However, his project is only liberal.

Genuine democracy and anti-capitalism

The Mexican social movements are faced with the challenge to take on the fight against accumulation by dispossession, global subordination and necropolitical capitalism without messianism. It is particularly important to think of the short-term within a long-term vision. Strategic thinking will be crucial to drive forward the project of a counter-hegemonic state. It will be important to develop further the critical teaching that is emerging. Spontaneity, as the seed of self-governance, as Rosa Luxemburg might say, houses a crucial source that could allow Mexico to open the way to genuine democracy and anti-capitalism in the 21st century.

* In a 60 minutes interview in September 2015 then presidential candidate Donald Trump called NAFTA “the single worst trade deal ever approved [in the United States]”. Seen from a Mexican perspective NAFTA is also a “worse deal” but for completely different reasons.

About the author: Dr. Luis Arizmendi holds an honorary doctorate from the Alva Edison University and has received several UNESCO prizes. B.A. in Economics, Masters in Sociology, UNAM (Universidad Nacional Autónoma de México); Professor of political economics at UNAM’s Faculty of Economics for more than three decades; Professor at the Instituto Politécnico Nacional’s Higher School of Economics. He is editor in chief of the IPN’s magazine Mundo Siglo XXI and has given around 70 keynote speeches at international conferences in Latin America, Asia and Europe.